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The Feldstein-Horioka puzzle across EU members: Evidence from the ARDL bounds approach and panel data

Christos Kollias, Nikolaos Mylonidis () and Suzanna-Maria Paleologou

International Review of Economics & Finance, 2008, vol. 17, issue 3, 380-387

Abstract: This paper addresses the saving-investment (SI) correlation for the EU15 member countries, using the ARDL approach and panel regressions. If we accept the Feldstein-Horioka [Feldstein, M. and C. Horioka, 1980, Domestic saving and international capital flows, Economic Journal 90, 314-329.] interpretation of the SI correlation, the evidence from the ARDL approach does not point to any particular direction in terms of country size, or level of development, or economic and capital market structure. Panel regressions yield an SI coefficient in the range of 0.148-0.157. This finding is attributed to higher capital mobility, lower transaction costs in the international capital markets, and the declining status of long-run current account targeting as a primary government objective.

Date: 2008
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